Along with a PPF withdrawal ruels and calculator, I am writing today to explain about the benefits of a PPF account for new or existing investors who wants to stay up to date with the updated rules and rate of interest.
Investment is not about following instructions blindly. Instead, there should be a goal for which one should invest. A goal can be anything, be that buying a new car, buying a house, education, marriage, retirement etc.
Since last few years, I am investing in a PPF account:
. . . the goal has been purely to add up to my retirement corpus.
Surely there were many more options in front of me but after little research, I had chosen to invest in PPF.
In this post, I will explain the benefits of a PPF account. Along with that, I will also explain how to ensure maximum return from your PPF account. And lastly, a PPF calculator which will help you to calculate returns.
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PPF account benefits
- An individual(employed or unemployed) can open a PPF account in his or her name and on behalf of a minor (child) as well.
- An investor can deposit minimum of Rs.500 and maximum of Rs.1,50,000 per year.
- A person can deposit Rs.1,50,000 at once(lumpsum) or in multiples of ₹50 any number of times in a financial year.
- If an individual deposits more than Rs.1,50,000 in a year, then the excess amount will not earn any interest and that amount will also not be exempted from Income Tax.
- If a person holds an account in his or her name and also opens one on behalf of a minor (child), then the combined contribution can’t exceed 1.5Lakh per year.
- Both husband and wife can hold individual accounts and can invest up to 1.5 lakh in each account
- A PPF investor gets a deduction benefit up to Rs.1,50,000 under Section 80C on deposits.
- Interest earned from a PPF account is tax-free.
PPF rate of interest 2020
As of Feb 2020, current(Apr 2020 – Jun 2020) rate of interest is 7.1%. Government revises ppf interest rate quarterly. Interest is calculated every month and paid on yearly basis.
PPF withdrawal rules 2020
The maturity period for a PPF account is 15 years, after which it can be retained by extending the maturity period of one or more blocks of 5 years each.
Between 3rd and 6th year, an account holder can take a loan once in a year of up to 25% of the available amount. Every loan has a repay period of 36 months. The account should be an active one and no past loan should be due.
After completion of 5 years, a PPF account can be closed prematurely by showing specific valid reasons like higher study, medical treatment requirement or on change in residency status of the account holder.
In case of premature closure of accounts, the account holder gets 1% lower interest than the rate at which interest has been credited to the PPF account.
After completion of 7 years, every year a partial withdrawal is allowed. The partial withdrawal is also tax-free.
Interest calculation and how to maximize return
Banks calculate interest on the minimum amount available between 5th & 31st of any month and paid yearly.
Because of this monthly calculation system, one can earn highest interest by depositing Rs.1,50,000 in the beginning of any financial year.
One can go for monthly option also, but in that case, amount must be deposited before 5th of each month. Otherwise, the latest deposit will not earn any interest for that given month.
Bank or post office, where should I open an account
As per convenience an individual can can open a PPF account in any of the banks or in a post office. PPF interest rate is managed centrally and are same in every bank and post office.
Even if required later, a PPF account can be transferred from any bank to any bank or to a post office. So these are pretty much all of the PPF withdrawal rules that have listed.
Overall PPF is a great mode of investment with an attractive interest rate. Managing a continuous investment in PPF can lead to a large amount for any future goal.
If this article was helpful or if you feel like I have missed to mention something important then please remind by providing your comment below.
Last but not least, thanks for reading and don’t forget to use the PPF Calculator to get a forecast of your savings in advance. Happy investing.